Researchers Urge Policymakers to Pause Efforts That Would Limit Investment in Assisted Living

This morning, the prestigious Journal of Health Affairs published an editorial (“Private Equity Investment In Assisted Living: Distinct Impacts And Policy Considerations”) on its policy blog Forefront by a team of academic researchers from Brown University, Georgetown University, Johns Hopkins University, and others studying private equity (PE) investment in assisted living. 

Argentum applauds Health Affairs for publishing this important article by such an esteemed team of researchers, which underscores the critical role private capital investment plays in ensuring access to high-quality assisted living options for our nation's seniors.

The authors’ findings support our long-held position that private investment in assisted living is distinct from investment in other healthcare providers. Assisted living primarily operates as a private pay model, unlike healthcare entities that are reliant on Medicare, Medicaid and commercial health insurance reimbursements. This model reduces the incentive to cut costs at the expense of quality, because assisted living communities compete to attract residents by offering high quality care and services that align with consumers’ preferences.

Key points from the op-ed include:

• There is no evidence to date that PE investment in assisted living negatively impacts resident care.
• PE firms can provide capital, technological advancements, and operational innovations to assisted living communities, potentially improving efficiency and quality. The emphasis on building a strong brand and reputation encourages maintaining high standards of care.
• Unlike PE investments in other healthcare sectors that often involve direct management, PE investment in assisted living is more analogous to real estate investment. The management and daily operations are almost always handled by separate entities, which stands in contrast with PE involvement in ambulatory settings and nursing homes, where firms have become directly involved in operations. That involvement has sometimes resulted in observed changes in care delivery.
• The assisted living sector is in a time of change. High interest rates have made the economics of selling and renovating riskier; access to skilled workers remains a challenge; the status of publicly subsidized assisted living is uncertain; and the demand for memory care and assisted living is increasing.
• Policymakers should pause and consider the unique structure, financing and history of assisted living before applying the same scrutiny and regulation as other healthcare sectors, stressing that it would be premature to assume that examples of PE acquisitions in other healthcare sectors, including nursing homes, is directly applicable to assisted living.

Importantly, the study highlights the lack of federal investment in assisted living infrastructure, meaning private investment is crucial for the continued existence and growth of this vital care option. The assisted living care setting exists solely because of private investment.

Given our rapidly aging population, assisted living providers will need access to capital—including capital from PE. As the authors suggest, “if implemented, the policies currently being proposed as solutions to PE investment in other health care settings may compromise that access. In so doing, such policies could have profound unintended consequences for a sector that serves close to one million older adults—all without critical nuance or basis in evidence.”

This groundbreaking research provides valuable insights and underscores the essential role private capital plays in ensuring a thriving assisted living industry that prioritizes the well-being of our nation's seniors. The authors’ research is supported by a 4-year grant from the National Institute on Aging to study PE investment in assisted living. At a minimum, state or federal legislative efforts to limit private investment in assisted living are premature before the findings are released.

The timing of this article is critical. Last week, Senators Elizabeth Warren (D-MA) and Ed Markey (D-MA) introduced S. 4503, the Corporate Crimes Against Health Care Act of 2024 to address alleged private equity and corporate abuse in health care (see bill text and summary).

In addition to the Warren bill, we are continuing to anticipate the introduction of Senator Markey’s Health over Wealth Act, which similarly could have negative impacts on private equity’s ability to finance health care and similar entities which also include assisted living communities. Argentum and ASHA submitted joint comments to Senator Markey last month outlining our concerns about including assisted living with clinical health care settings and specifically requested to be removed from the definition of health care entities. We believe that the bill will be introduced sometime in July, although there is no firm timetable.